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How risky is it to keep my savings essentially in the stock market? Watch

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    It's veeeeeeeeeeeeeryyyyy risky. Correlation and concentration risk are a few of your main worries. If you are going to go down this route I would diversify across several sectors and types of funds, don't go for highly levered ETFs or anything fancy like that. Also if possible, I would take out some of the money and place it into a government bond..
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    (Original post by Princepieman)
    It's veeeeeeeeeeeeeryyyyy risky. Correlation and concentration risk are a few of your main worries. If you are going to go down this route I would diversify across several sectors and types of funds, don't go for highly levered ETFs or anything fancy like that. Also if possible, I would take out some of the money and place it into a government bond..
    How diversified should I be?

    I have a few growth stocks, a bond and a few dividend stocks. I want to focus on dividend stocks, so I eliminate some of the "market turmoil" risk. Like even if the price drops because of panic selling, the dividend will still keep on coming.

    Right now I have 8 securities, I want more but currently don't have the money to put in. I usually put around 1.5-2k a security. The transaction costs build up on each security which is an issue. The more securities I hold the more it will cost me in transaction costs to buy and sell.

    I find you can hit good diversification with 8-10 securities across different sectors in different countries.
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    (Original post by fg45344)
    How diversified should I be?

    I have a few growth stocks, a bond and a few dividend stocks. I want to focus on dividend stocks, so I eliminate some of the "market turmoil" risk. Like even if the price drops because of panic selling, the dividend will still keep on coming.

    Right now I have 8 securities, I want more but currently don't have the money to put in. I usually put around 1.5-2k a security. The transaction costs build up on each security which is an issue. The more securities I hold the more it will cost me in transaction costs to buy and sell.

    I find you can hit good diversification with 8-10 securities across different sectors in different countries.
    Ah, not as bad as I thought, good thinking with that spread. I'd say for now your set up looks pretty good and you seem smart enough to take into account the various risk exposures you'll be under.

    I'd maybe throw in a diversified ETF too - ala Vanguard.


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    (Original post by Princepieman)
    Ah, not as bad as I thought, good thinking with that spread. I'd say for now your set up looks pretty good and you seem smart enough to take into account the various risk exposures you'll be under.

    I'd maybe throw in a diversified ETF too - ala Vanguard.


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    There is one reason I hate Vanguard and I know this is a bad reason, I feel if you are going to play the markets, you have to beat them. Being super diversified with Vanguard will give you essentially a market return, which is good, but surely if you are motivated and smart enough to deal in the markets, you should be beating them.

    I mean I think Vanguard have this fund which holds all 3600 stocks traded on american exchanges or something like that, but there is a lot of crap (like banking stocks right now) which I really don't want to hold.

    Though for a novice I always recommend diversified ETFs, like you said. It eliminates unsystematic risk and you don't need to keep track of anything. You can buy and hold.
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    (Original post by fg45344)
    There is one reason I hate Vanguard and I know this is a bad reason, I feel if you are going to play the markets, you have to beat them. Being super diversified with Vanguard will give you essentially a market return, which is good, but surely if you are motivated and smart enough to deal in the markets, you should be beating them.

    I mean I think Vanguard have this fund which holds all 3600 stocks traded on american exchanges or something like that, but there is a lot of crap (like banking stocks right now) which I really don't want to hold.

    Though for a novice I always recommend diversified ETFs, like you said. It eliminates unsystematic risk and you don't need to keep track of anything. You can buy and hold.
    Ahaha, I can't blame you. It is quite fun to beat the markets and you feel wonderful returning more than the S&P in any given month but I guess for the average joe blogg it would make more sense to take a less 'active' approach.

    Sounds like you're thinking about this in the right way, so all I can say is good luck

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    (Original post by Princepieman)
    Ahaha, I can't blame you. It is quite fun to beat the markets and you feel wonderful returning more than the S&P in any given month but I guess for the average joe blogg it would make more sense to take a less 'active' approach.

    Sounds like you're thinking about this in the right way, so all I can say is good luck

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    I feel I have the knowledge but not exactly the market experience. I've only been meddling in the markets for the last year or so ( I know, bad time, possibly dying bull market and slow global growth).

    But I do watch bloomberg every day or every other day to keep track of what is going on in the markets.

    My knowledge is based on my masters degree, MSc Finance and Econometrics at QMUL, but I would love to hear more from someone who has real world market experience.
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    (Original post by fg45344)
    I have put the majority of my savings 13000 pounds so far in a variety of stocks and bonds, around 8 or so? Trying to keep the diversification up!

    Just wondering if anyone else does this. I have like 700-1000 pounds in cash in my bank account for everyday life, but I usually save in my stocks and shares ISA.
    My mother bought 15,000 in bonds yesterday... I hope she wins. The bonds become active in December!
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    (Original post by urbanlocations)
    My mother bought 15,000 in bonds yesterday... I hope she wins. The bonds become active in December!
    Active in december?

    Are these premium bonds or bond securities (as in normal bonds-like lending money to a company/government)
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    (Original post by fg45344)
    Active in december?

    Are these premium bonds or bond securities (as in normal bonds-like lending money to a company/government)
    I am not fully sure Its a bit like the lottery where you have numbers

    http://www.nsandi.com/prize-checker
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    (Original post by urbanlocations)
    I am not fully sure Its a bit like the lottery where you have numbers

    http://www.nsandi.com/prize-checker
    Oh ok, it's premium bonds. Yeah those are a bit different to normal bonds.

    You should tell your mum to open up a stocks and shares ISA and buy a diversified vanguard fund, I know its complicated if you've never dealt in finance!

    But she can make much more money from that over the long term than premium bonds, unless she is very lucky! But good luck!
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    i stick my money in gold i buy privately then just wait for a rise and cash out
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    i have clinets who do the same and made £29,000 out of the brexit rise (£2k personal and £27k commission)
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    (Original post by jamesthehustler)
    i stick my money in gold i buy privately then just wait for a rise and cash out
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    i have clinets who do the same and made £29,000 out of the brexit rise (£2k personal and £27k commission)
    Hmm, I have a love-hate affair with gold. I love how it looks and feels and how I can keep playing with it as much as I want! However....

    I don't like the fact it doesn't produce steady income for me, I am essentially specualting on the price, what the next guy is willing to pay for the lump of shiny metal. This refers to the theory of income producing investments by warren buffett. You'd rather own a farm that produces eggs, milk etc and still have the farm in the end after 20 years than a farm which produces nothing but you expect it to appreciate in value after 20 years.

    But gold is a great hedge against market turmoil and possibly inflation, though not so much the last few years (other than the brexit gold rush)
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    (Original post by fg45344)
    Oh ok, it's premium bonds. Yeah those are a bit different to normal bonds.

    You should tell your mum to open up a stocks and shares ISA and buy a diversified vanguard fund, I know its complicated if you've never dealt in finance!

    But she can make much more money from that over the long term than premium bonds, unless she is very lucky! But good luck!

    Thank you for the advice!! Btw how did you come about getting 13k?
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    (Original post by fg45344)
    I have put the majority of my savings 13000 pounds so far in a variety of stocks and bonds, around 8 or so? Trying to keep the diversification up!

    Just wondering if anyone else does this. I have like 700-1000 pounds in cash in my bank account for everyday life, but I usually save in my stocks and shares ISA.
    The riskiness of your strategy can depend on all sorts of factors but from the sounds of it, it seems too high for personal savings. If you believe you won't need to touch your savings for years, it's possibly ok but if you may at any time need them in the near future, I think the level of risk is higher than necessary. In addition, holding £700-£1000 in cash seems a little too insufficient for me as you never know when you need an emergency fund. The general idea is to have around 3-6 months of spending in cash before delving into shares or bonds.

    In addition, as you want to focus on dividend-paying stocks bear in mind that dividends aren't guaranteed, even if the company has a history of paying them (for reference, even the likes of Warren Buffett got caught out with Tesco). Several companies reduced payouts during the recession and future dividend payments are at the mercy of corporate performance and the general attitude of the management with paying them. These things aren't pure income generating machines and ideally you should be aware of what the company fundamentals are like and how they operate so that you know where your yield is coming from. You should also beware of chasing yield too much as you may well be running into diminishing quality.
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    (Original post by fg45344)
    Hmm, I have a love-hate affair with gold. I love how it looks and feels and how I can keep playing with it as much as I want! However....

    I don't like the fact it doesn't produce steady income for me, I am essentially specualting on the price, what the next guy is willing to pay for the lump of shiny metal. This refers to the theory of income producing investments by warren buffett. You'd rather own a farm that produces eggs, milk etc and still have the farm in the end after 20 years than a farm which produces nothing but you expect it to appreciate in value after 20 years.

    But gold is a great hedge against market turmoil and possibly inflation, though not so much the last few years (other than the brexit gold rush)
    I have to agree with that but I have some cash in shares(£9,000 now) and a property share bond (£10,000) as well I am losing money on what I paid but the dividends are good as well as some other perks
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    £1,000 in IGH-cheap rates on hotels
    £1,000 in BP
    £1,000 in BT
    £1,000 in MBG-shareholders vouchers every few months
    £5,000 in BA- premium departure lounge access
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    They say ideally 75% in stocks 25% in Bonds when times are good. With bearish outlook, 25% in Stocks, 75% in Bonds. However this drastic approach is very much outdated. I would advise 60% in Stock 30% in Bonds, the rest is up to you. Some people love to keep some additional 'funny money' which you use to trade on high leverage (with stop loss!) or without the stop loss if you know how to buy/sell options, which is i think far better option as it won't stop you out in short-term pullbacks like stop loss would, thus loosing on profitable opportunity.

    Until The Article 50 is triggered, do whatever you want with FTSE100. Once it get triggered, do yourself a favor a dump all ftse100 shares you may have, and as always do not invest more you can afford to loose. For lot of people it represents roughly 20-30% of their overall wealth (taking account of all things you can live without and easily liquidate).
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    Given the relative lack of diversity its fairly risky although i dont know who's shares you own s some seem to wheather storms better.
    if you want solid security gold is the usual safe bet and some blue chip stocks..
    personlly if i wanted security but the chance for a return id be looking at various funds who [one hopes] have enough capital to spread their risk and not load up on dodgy inverse IOs and other cack [take procter and gamble a wee while ago]
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    (Original post by urbanlocations)
    Thank you for the advice!! Btw how did you come about getting 13k?
    Just saving money from working. I work part time in a pharmacy (like a day a week) and I study for a PhD in economics.
 
 
 
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